University of California has backed off plans to become the main tenant in a major development project in downtown Oakland, saying it needs to focus first on getting its financial house in order after an executive pay controversy.

The UC Office of the President was to anchor an 11-story high rise on a long-vacant parcel at 1100 Broadway, between 11th and 12th streets. Plans also call for retail space and renovations to the historic Key System Building on the parcel’s northwestern corner.

UC officials said Thursday it is unwise to proceed with the lease arrangement while they are embarking on a reorganization of the president’s office.

“With everything we’re going through, we felt that going into something that’s so long-term, when we don’t know what the reorganization is going to look like, would not be a good idea,” said UC spokeswoman Jennifer Ward.

The reorganization is intended to get a better handle on business practices after newspaper articles detailed large spending on bonuses, stipends, sabbaticals and other types of compensation for highly paid employees. Many of the payments were not revealed to the public and ran contrary to university policies.

The project developer, East End Oakland I, LLC, was to foot the bill for the building in exchange for a 10-year lease agreement with the university.

The developers will move forward with their plans, said Jeff Nelson, managing member of San Francisco-based Townsend Transactions, a partner in East End Oakland, which also includes Eastmont Properties in Oakland.

“We like the location, we like the city of Oakland, we like the current market conditions and we think it’s time to move forward with the office building,” Nelson said.

UC’s decision “was disappointing,” he said, “but we understand they couldn’t commit to that kind of (long-term) commitment.”

The new building would have allowed the president’s office — the administrative headquarters of the 10-campus UC system — to consolidate into one location about 800 employees currently scattered throughout five satellite offices in Oakland and Berkeley. The employee consolidation would save $2.5 million a year on lease payments, officials said in November.

Ward said UC may decide to continue with the project at a later date.

“It’s not closing any doors,” she said. “At this point, they just wanted to pause for a second.”

The parcel under development abuts the backside of UC’s president office at 1111 Franklin St.

UC hadn’t signed a lease at the new building and is not expected to incur any liability, Ward said. Last April, UC published a request for proposals on the office consolidation and has spent about $9,100 on costs associated with the plan, including consultant fees, advertising, copy supplies and catering for related meetings.

For now, UC employees will remain in their current locations at one satellite office in Berkeley and four in Oakland. Lease agreements on the spaces expire in 2008 or later.

Officials will likely revisit the consolidation plans after the office reorganization is complete.

“We need to know what we are going to look like and how we are going to be organized before we can make long-term space plans,” UC’s Vice President for Budget Larry Hershman said in a statement. “Over the next several months, we will carefully examine the consolidation initiative and will consult internal and external sources for advice on how best to move forward.”

The Broadway parcel, on a prominent downtown corner, has been vacant for several years since the building formerly on the lot was torn down by a developer who planned to build a boutique hotel. That plan failed after a hotel industry downturn following the Sept. 11, 2001, terrorist attacks.

The Key System Building was built in 1911 and is listed on the National Register of Historic Places. It was the original site of the Security Bank and Trust Co., later acquired by the Bank of Italy, which became Bank of America.

The building, acquired by the Key Route Transit System, has been vacant since the 1989 Loma Prieta earthquake.

Gangs were likely involved in the string of arson attacks, police said, and they come amid mounting concerns in Sweden about gang-related violence. More than 40 people were shot and killed in the Nordic country last year, and the prime minister said in January that he was not ruling out a military response to gang activity.

A rooftop camera recorded the silver Ford Fiesta driving past Parliament and suddenly veering sharply to the left, striking cyclists waiting at a set of lights, then crossing the road and crashing into a barrier outside Parliament. Armed police surrounded the car within seconds, pulling a man from the vehicle. Police said the driver was alone and no weapons were...